The growth of the Indian Textiles & Clothing (T&C) industry, especially in the Man Made Fibre (MMF) space, has been stagnant in recent years mainly due to lack of global competitiveness in the man-made fibre / filament yarn prices. Cotton has been the growth engine of the Indian T&C industry. Indian cotton is generally available to the industry at a price which is slightly lower than the international price and is the livelihood of several millions of cotton farmers. Cotton fibre does not attract import duty or anti-dumping duty and therefore, the entire cotton value chain in India remains globally competitive.
Cotton is used only for one fashion cycle in a year (Spring/Summer) globally and for the remaining seasons the world predominantly needs man-made fibre textiles and clothing materials. Indian MMF products account for 20% of the total T&C exports, whereas, in China and other textile exporting countries it is 80%. India is not able to make any progress in MMF T&C exports due to the raw material price disadvantage despite being the second largest producer of MMF in the world. Small countries like Bangladesh, Vietnam, Sri Lanka, etc., are able to increase their exports manifold in recent years and have surpassed India due to the cost advantage of MMF even though they do not produce the raw material but have access to them at international prices. Hence, making MMF available at international prices is a basic structural issue to be addressed by the Government to improve the global competitiveness of Indian textile and clothing exports.
Consequent to the continuous pleas made by the industry, the Government made a bold move to remove the anti-dumping duty on PTA, a major raw material for polyester staple fibre and also rejected the proposal of ADD on PSF and MEG and thereby created a level playing field in the polyester segment. However, the next important MMF raw material viz., Viscose Staple Fibre (VSF) (HSN Code: 55041000) is still given undue protection by way of anti-dumping duty that seriously affects the entire viscose staple fibre textile value chain. VSF attracts ADD of 0.103 USD to 0.512 USD per kg for the imports even from countries like Indonesia.
In a Press Release issued here today, Mr.Ashwin Chandran, Chairman, The Southern India Mills’ Association (SIMA) has stated that the Association has sent several representations to the government and also to the Hon’ble Union Ministers for Finance, Commerce and Textiles appealing to remove the anti-dumping duty levied on viscose staple fibre that has been in existence for the past 10 years. He has said that VSF is produced by a single manufacturer in the country and they monopolize the customers with their pricing policy. MSME spinners who don’t have the negotiation power with the monopoly supplier suffer the most and thereby the powerloom fabric exports become uncompetitive and affected. He has also pointed out that there are several polyester fibre producers in India and the spinners are able to get competitive prices unlike VSF.
Highlighting the growing demand for Viscose fibre in India, he has pointed out that the current capacity of the domestic producer is not enough to meet the growing demands of the industry and hence the indigenous producer is adopting import parity pricing while selling the fibre to domestic spinners at a premium of Rs.20/Kg taking advantage of ADD. He has stated that the indigenous producer is exporting the same to our competing countries like Bangladesh, Turkey, Nepal, and Sri Lanka at international prices. This discriminatory pricing policy seriously affects the competitiveness of the entire viscose-based value chain in India.
Mr.Ashwin has pointed out that the MSME segment, especially the powerloom segment is not able to gain advantage of the indigenous fibre. He has added that the Competition Commission of India in its order dated 16th March 2020, case No.62/2016 levied Grasim Industries Limited a penalty of Rs.301.61 crores for abuse of dominant position in the market for supply of viscose staple fibre (VSF) to spinners in India and Grasim was found to be charging discriminatory prices to its customers, besides being found to be imposing supplementary obligations upon them.
Having a single supplier has got lot of demerits. The domestic fibre manufacturer adopts a highly complicated domestic pricing policy.They promise discounts to the tune of 40% while withholding over 1/3rd of it till the year end leading to the blockage of the working capital. They link the discount to the incremental fibre consumption with a one-sided penalty clause and prevent sourcing from other suppliers with an annual contract.
SIMA Chairman has stated that in the recent years, the powerloom industry are dependent on imported Viscose Spun Yarn to compete in the global market. The import of Viscose Spun Yarn was 2,022 tons during the year 2016-17 and the same increased to 56,262 tons (over 27 times increase) during the year 2019-20. The opportunity loss incurred during the year 2019-20 due to Viscose Spun Yarn import is estimated at four lakh spindles production capacity worth around Rs.1,000 crores and 8,000 jobs in spinning and also a forex outflow of USD 129.15 million.
SIMA Chairman stated that while the government is encouraging exports of value added textile products by extending MEIS, RoSL and RoSTL schemes to the garment and made-ups segments, the differential pricing policy followed by the indigenous VSF manufacturer makes us lose our competitive edge to other Nations who grab the lion’s share of the export markets for these products. VSF producers in countries like Indonesia supply VSF either at the same price or slightly lower price to encourage value addition, job creation and forex earnings which is not there in the case of Indian VSF manufacturer.
Mr.Ashwin Chandran has stated that the entire globe follows the VSF price based on wood pulp prices which has been on the declining trend globally; the indigenous manufacturer always keeps the price much higher than the international price taking advantage of the anti-dumping provision. Even though the domestic producer is planning to add new capacities, they will continue to monopolize the domestic value chain unless ADD on viscose fibre is removed.
Removing the ADD on VSF will make the domestic VSF prices aligned with Global VSF Prices making the entire Indian VSF textile value chain globally competitive and boost production and exports of these products.